Accounting Basics 2

What is the accounting equation?

• Liabilities = Assets - Equity

• Equity = Assets - Liabilities

• Assets = Equity - Liabilities

• Assets = Liabilities + Equity

What are examples of assets in a business?

• land, patents, goodwill, trademarks

• buildings, vehicles, furniture, machinery

• stocks, bonds, mutual funds, retirement accounts

• cash, inventory, equipment, accounts receivable

Define liabilities in accounting.

• Liabilities are expenses incurred by the company.

• Liabilities are assets owned by the company.

• Liabilities are the company's obligations or debts that arise during the course of business operations.

• Liabilities refer to the company's revenue.

What does capital represent in the accounting equation?

• Owner's equity or net assets of the business

• Total liabilities

• Cost of goods sold

• Revenue generated

How do you calculate liabilities in terms of assets and capital?

• Liabilities = Total Equity - (Assets + Capital)

• Liabilities = Total Equity * (Assets + Capital)

• Liabilities = Total Equity / (Assets + Capital)

• Liabilities = Total Equity + (Assets + Capital)

Explain the relationship between assets, liabilities, and capital.

• Assets = Liabilities - Capital.

• Assets are liabilities multiplied by capital.

• Assets are what a company owes, liabilities are what it owns, and capital is the sum of the two.

• Assets are what a company owns, liabilities are what it owes, and capital is the difference between the two. Assets = Liabilities + Capital.

If assets are $10,000 and liabilities are $3,000, what is the capital?

• $12,000

• $8,000

• $7,000

• $5,000

If liabilities are $5,000 and capital is $7,000, what are the assets?

• $6,000

• $8,000

• $12,000

• $10,000

What happens to the accounting equation if assets increase?

• The accounting equation becomes unbalanced.

• Liabilities decrease.

• Equity decreases.

• The accounting equation remains balanced.

What happens to the accounting equation if liabilities decrease?

• Equity decreases

• Liabilities increase

• Income increases

• Assets decrease